Battle lines drawn as Mueller’s chunky deal riles workers

Christoph Mueller’s €1.5 million remuneration for last year, as detailed in Aer Lingus’s recent annual report, will have done little to ease tensions with staff and their trade unions over the long-running pension issues. It was an 18 per cent rise on the previous year.

It also comes alongside an announcement that the airline wants to shave another €30 million from its cost base. Increasing executive pay while proposing to cut staff numbers never goes down well with the troops.

Not that the board of Aer Lingus is too bothered. As far as they are concerned, Mueller is worth every cent he earns.

In his five years at the helm, the German has overhauled Aer Lingus's strategy, returned it to sustained profitability, paid a dividend, fended off a third Ryanair takeover proposal and more besides.

They would also argue that his salary of €475,000 is on the low side compared to peers in the industry.

For most Irish people, there’s only one comparison worth making and Michael O’Leary was paid €1.27 million last year by Ryanair – €768,000 in salary and a €504,000 bonus.

No pension payment for Mick.

Doing all right
Ryanair made an after-tax profit of €569 million last year compared with Aer Lingus's €34 million. So Mueller seems to be doing all right.

The one box not ticked by Mueller is a deal with workers on the deficit in the pension scheme jointly operated with the Dublin and Shannon airport authorities.

This saga has been rumbling for the guts of four years. It’s a long and involved story but, in essence, the workers want Aer Lingus to pony up more cash to deal with the deficit in the old scheme, in advance of current workers being transferred to a new defined-contribution plan.

A resolution won’t be without pain for members who will have to accept reduced benefits. It’s a question of how deep the cuts will go. Strictly speaking, Aer Lingus believes that a deal struck at the time of its stock market flotation in 2006, when it put a wedge of cash into the scheme, relieves it of any duty to plug the gap in the pension. But in the interests of industrial goodwill, and in an effort to sort this out once and for all, it has agreed to make a contribution of €140 million to the scheme to help resolve this ongoing issue. Not a cent more.

It's a chunky sum of money and will necessitate Aer Lingus seeking shareholder approval at an extraordinary general meeting. Needless to say, Ryanair, which owns just under 30 per cent of Aer Lingus, is not impressed.

Chipping in
The airport authorities are also chipping in to the pot and there were Labour Court recommendations on the matter last year.

There are two specific reasons why Mueller’s pay package for 2013 sticks in the craw of Aer Lingus workers.

First, the contribution paid by Aer Lingus to Mueller’s own pension increased to €175,000 from €119,000 in 2012. His base salary remained the same so effectively the company increased its contribution from 25 per cent of salary to about 37 per cent.

Second, Aer Lingus’s remuneration committee decided to “exercise its discretion” not to pay 3,700 employees the full amount of the gain-sharing payment they were due.

In spite of the company meeting agreed targets in relation to profitability and cost savings last year, the staff have only been given €250 each as part-payment. In the round, just €925,000 is being paid from €6.25 million due.

Why?

Because the Labour Court recommendations regarding the pensions scheme
have not yet been implemented and there is an ongoing pilot pay review process under way.

"The committee will re-visit later in 2014 the issue of the payment of the balance of the amount payable under the gain-sharing arrangements," the Aer Lingus annual report states.

Cash award
Mueller's remuneration last year included €820,000 in bonus payments. One was performance-related and amounted to €420,000 (down from €647,000 a year earlier) while the other was a once-off cash award of €400,000, partly for keeping the show on the road against the distraction of a Ryanair bid in 2012/13.

By any measure, these are generous payments, especially in the current economic climate. For staff, it reinforces the them-and-us syndrome, especially with the pensions issue hanging around. One rule for the officer class and another for the grunts.

The battle lines have been drawn. It’s now up to the so-called expert panel, representing employers and unions, to negotiate a peace deal.

Good luck to them.